Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 26, 1992 TAG: 9201280353
SECTION: ECONOMY PAGE: 14 EDITION: METRO
SOURCE: GEORGE KEGLEY BUSINESS EDITOR
DATELINE: LENGTH: Medium
EXECUTIVES PAN '91, BUT CROSS FINGERS FOR RECOVERY
After a steep decline in earnings last year - blamed on the recession and a decline in construction - Don Smith said he's keeping his fingers crossed that 1992 will be better.But Smith, chairman of Roanoke Electric Steel Corp., said "no major improvement is in sight."
Businesses in Western Virginia, like those in many areas of the country, felt the economic impact in 1991 of the Gulf War, lower demand for products and depressed prices and profits.
Yet, optimism prevails. While two-thirds of the region's corporate executives responding to a poll said business was worse last year than in 1990, they were evenly divided on whether conditions would improve or remain the same in 1992. Only 13.5 percent said business conditions will be worse this year.
Of the executives who said their business improved last year, 24 percent forecast even better times this year. Ten percent see no change in sight.
The responses are from 96 executives to the annual Roanoke Times & World-News economic survey. The findings show:
Fifty-five percent said conditions for their own companies will improve in 1992, 34 percent expect no change and 10 percent expect things to get worse.
Also, 59 percent said they are cautious and only 18 percent are optimistic. Their caution is reflected in employment planning. About 53 percent said their work forces will be unchanged. It was an even split on whether the work force would grow or shrink. More than two-thirds expect rising labor costs this year.
Almost half said prices they'll receive for products and services will be unchanged but 36 percent expect to raise prices. Sixty-three percent expect higher costs for raw materials and services.
Capital-spending plans are unchanged at 48 percent of the companies, while 31 percent plan to reduce spending and 14 percent said they will budget more.
> Among the majority who expect labor costs to increase, 33 percent see no change in capital spending, but 21 percent will reduce budgets for plants and equipment. Seven percent expect an increase.
Company officials said they are watching closely for signs of economic improvement, especially for action by President Bush and Congress to bolster consumer confidence.
Several expect business growth later this year but they admit there is little in the pipeline for improvement during the first quarter.
Ernest Hinck, vice president and general manager of Ingersoll-Rand's Rock Drill Division, said business remains "pretty soft" in January but he hopes that the new federal transportation act will pep up his Roanoke County plant in the second quarter.
Odds are good for increased momentum by midyear, "but we're concerned about the next few months," Hinck said.
The executives had a long list of factors they said influenced their companies in 1991, starting with a fear of layoffs, customers' sluggish orders and financial weakness, slower payments and a poor real estate market.
Others added shrinking bank financing, overbuilding in the 1980s, competitive pressures on pricing, weak sales, a severe decrease in profit margins, fewer construction projects, general belt tightening and "discouraging news from the press" as major factors behind business decisions.
The Gulf War and growing competitiveness in world markets had a direct impact on many companies.
Influences for the year ahead are similar.
In 1992, the executives said they expect their companies will be affected by continued low confidence, credit problems, a decline of defense spending, continued downturn in construction because of overbuilding of offices and shopping centers, and greater supply than demand of most commodities and layoffs.
They talked of a continued emphasis on productivity, quality and customer service to offset weakness in the economy.
The respondents were promised anonymity in exchange for candor. Most replies indicate simply their lines of business.
One contractor reported he's considering reducing employment by 15 percent to 20 percent this spring. He blames excessive building in the 1980s, a shrinkage of bank financing and a cutback in government spending for halting construction.
An equipment manufacturer said the "real problem is that lower-paid workers are just getting by. They have no money to buy new cars, after they pay their living expenses." Corporations, the official said, "must make cuts at the top and accept lower profits for the time being."
A car dealer, a hotel executive and a clothing merchant expect to continue trimming their employment. A grocery executive expects 1992 will be better despite "the sluggish economy."